Armenia’s Central Bank raises interest rate to 7% amid inflation and energy concerns

YEREVAN — Armenia’s Central Bank raised its refinancing rate by 0.25 percentage points to 7 per cent on November 3, citing persistent inflationary pressures and uncertainty surrounding domestic and international economic developments.

Central Bank Governor Martin Galstyan said the decision reflected continued price pressures despite the country’s ongoing economic activity.

Annual inflation reached 4.3 per cent in September, while core inflation stood at 4.7 per cent, both exceeding the bank’s medium-term target of 3 per cent. The Central Bank also examined the possible economic consequences of higher natural gas prices.

According to Galstyan, preliminary sensitivity analysis suggests that a hypothetical 10 per cent increase in gas prices could add approximately 0.8 percentage points or more to inflation through direct and indirect effects.

He stressed, however, that the bank currently lacks the information needed to accurately model the consequences of an actual tariff increase. The governor noted that the estimates were hypothetical and did not indicate that a particular increase in gas prices had been decided.

Galstyan also discussed risks associated with external demand, trade restrictions affecting exports to Russia, consumer confidence and rising costs in domestic services.

The Central Bank said it would continue monitoring economic developments and adjust monetary policy as necessary to maintain price stability.

Higher interest rates may increase borrowing costs for households and businesses while helping moderate demand and inflation. The decision comes amid growing attention to living costs, energy security and Armenia’s broader economic outlook.